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Case Note: Astral Operations Ltd / RCL Foods Consumers (Pty) Ltd v Eskom Holdings SOC Limited and others

17 January 2020

What would our first Linked In article of the decade be without including Eskom?

You may have heard of Eskom’s numerous public notices informing of its decision to interrupt and eventually discontinue the electricity supply to certain municipalities due to their indebtedness to it. Municipalities all over the country are indebted to Eskom for billions of Rands. It seems that after allowing this debt to escalate out of control, Eskom is now deciding to act. The action of interrupting supply, however, means that rate-paying members within such municipalities’ jurisdictions are denied electricity for no fault of their own. This is extremely unfair and has catastrophic consequences to businesses and communities.

Towards the end of last year, Eskom distributed one of the abovementioned public notices to members of the Rand West Municipality. Two major food manufacturing and distributing facilities (the “applicants”) promptly launched an urgent application against Eskom to interdict (prevent) it from interrupting the supply of electricity to the municipality.

In 2018 in Cape Gate (Pty) Ltd and Others v Eskom Holdings SOC Ltd and Others, a full bench of the Johannesburg High Court ordered that Eskom was interdicted from interrupting electricity supply in very similar circumstances to those of the applicants. In line with this decision, acting Judge Gerry Nel granted an order in the applicants’ favour.

The Electricity Regulation Act, 4 of 2006, contemplates that Eskom may terminate the supply of electricity to a customer (e.g. a municipality). Having considered the previous judgments concerning similar issues, Nel AJ summarised the legal principles that have developed in respect of Eskom’s powers to do so, namely, any decision taken by Eskom to interrupt or disconnect electricity supply is an administrative action and accordingly must be just, responsible, respectful and fair, having regard to the end-consumer of the electricity.

The applicants’ interim relief was granted for reasons including the following:

  • They have a right to freedom of trade, occupation and profession, a right to electricity, a right to equality and a right to just administrative action – Eskom’s intended interruption of electricity would severely infringe these rights, having dire consequences for the applicants and every other business / consumer in the area.
  • The interruptions would cause irreparable harm to the applicants.
  • The interruptions would result in severe economic losses to the applicants, loss of employment and the potential closure of their businesses. Eskom, on the other hand, would suffer no real prejudice in that not interdicting its decision would not lead to the closure of Eskom.
  • There is no other satisfactory remedy available to the applicants – a damages claim is not an option.

In conclusion, Nel AJ ordered that the municipality is to separately specify the Eskom tariff portion in respect of electricity supply in future municipal accounts to the applicants so that the applicants can pay this amount directly to Eskom.

This decision reaffirmed previous decisions made by the courts in respect of Eskom’s attempt to interrupt electricity supply due to the indebtedness of municipalities. Such a decision is a just one in that innocent rate-paying consumers should not be punished for Eskom’s failure to properly handle the rising debt of municipalities. Having lost on this course of action more than once, we hope that Eskom will change its strategy and determine an equitable solution for dealing with the debt of a myriad of municipalities.